What is Classed as an Abnormally Low Tender in Public Sector Procurement?

In this context, an abnormally low tender can raise eyebrows and spark concerns among procurement professionals. When it comes to public sector procurement, our tender writers are no strangers to the intricate dance of submitting bids. We meticulously craft proposals that aim to win lucrative contracts for our clients while staying within budget constraints.

However, a delicate balance must be struck between offering competitive prices and ensuring quality outcomes. But what exactly qualifies as an abnormally low tender in this realm? In this blog, we will delve into the definition, implications, and potential causes of such tenders in the public sector procurement landscape.

Defining an abnormally low tender

An abnormally low tender in public sector procurement is a bid that is significantly lower than the average price for similar goods or services. It raises concerns about the quality and viability of the proposed project. While competitiveness and cost-effectiveness are essential in procurement processes, an abnormally low tender can suggest potential issues such as inadequate resources, poor quality materials, or non-compliance with regulations.

In order to prevent abnormally low bids, most public sector tenders state that bidders can be excluded from the process if their bid falls into this range.

Factors considered for determining abnormality

One key factor in assessing abnormality is the information available during the tender evaluation process. Public sector officials examine whether any material information was overlooked or not considered by bidders when estimating their costs. They also consider if there are any undisclosed external subsidies or financing arrangements involved, which could explain why a bid seems disproportionately low.

Additionally, the complexity and technical requirements of a project are taken into account when evaluating tenders. If one bid stands out as substantially cheaper than others but still meets all necessary specifications, it may not necessarily be abnormal but simply more efficient or innovative in its approach.

Indicators of a potentially abnormally low tender

Pricing well below competitors can be a red flag. If a bid seems too good to be true, it often is. While it’s natural for organisations to strive for cost savings, an excessively low price may indicate that the bidder has misunderstood the project requirements or intends to cut corners.

If the tender price does not align with industry benchmarks or historical data, it may raise concerns. Public sector procurement typically involves multiple bidders who possess similar levels of expertise and resources, so a bid considerably deviating from the average market range should ring alarm bells.

Insufficient staffing levels or inadequate resources proposed by the contractor can also suggest an abnormally low tender. If the proposed team size appears disproportionately small compared to industry standards or lacks the necessary qualifications and experience for successful project delivery, it could lead to subpar results and potential delays.

Implications for both bidders and authorities

An abnormally low tender in public sector procurement can have significant consequences for both the bidders and the authorities involved. For bidders, submitting an abnormally low tender may appear attractive initially, as it increases the chances of winning the contract. However, this strategy poses numerous risks. Firstly, if a bidder wins a contract with an unrealistically low bid, they may struggle to deliver the required services or products at cost and on schedule. This can lead to financial losses for the bidder and potential reputational damage. Such practices also contribute to unfair competition within the industry by undercutting other more viable bids.

Authorities also face severe implications when accepting an abnormally low tender. While it may be tempting for authorities to choose a lower-cost option to save taxpayer money or comply with budget constraints, they need to consider all factors before making a decision. Accepting an unrealistically low bid often leads to compromised quality of work or products delivered by contractors who may cut corners due to insufficient resources allocated for completing the project successfully. Additionally, there is a risk that contracts awarded based solely on price create a cycle where contractors consistently underbid on projects only to seek changes later through claims and modifications that increase costs beyond what was originally submitted.

While an abnormally low tender might seem like a win-win situation at first glance – saving money for authorities while providing business opportunities for bidders – its consequences are far-reaching and detrimental in reality.

Preventing and addressing abnormal tenders

Organisations in the public sector are vigilant in preventing and addressing these abnormalities to ensure fair competition, transparency, and value for money. By implementing robust controls and monitoring mechanisms, governments and procurement teams minimise the occurrence of abnormal tenders while also detecting them swiftly if they do arise.

One effective strategy is to establish clear criteria for evaluating tenders, including a minimum threshold for price-quality ratio. This helps to identify tenders that deviate significantly from market norms or industry standards. Some organisations have a prequalification process where potential bidders are required to demonstrate their capabilities and track record before being invited to submit bids. This step helps to weed out unqualified or disreputable suppliers who may present themselves in the tendering process as a mere façade.

The importance of fair competition in public procurement

Fair competition in public sector procurement is crucial for the effective and efficient allocation of resources and the delivery of high-quality goods and services. It ensures that taxpayer money is spent wisely and transparently, promoting trust and accountability between governments and citizens.

By encouraging multiple suppliers to compete on a level playing field, fair competition fosters innovation, drives down costs, and promotes diversity and inclusivity in the marketplace.

If you’re looking for assistance with creating a winning bid, contact our team of tender writers today. Call 0116 218 2700 to discuss your requirements and receive a free no obligation quote.